Bridging the Gap Between China & Central Europe

In 2012, China and 16 Central and Eastern European countries together formed the “16+1” regional framework, a loosely aligned grouping that focuses on increasing trade and investment between the participating countries. While China’s increasing influence in Africa, Australia, and other global regions has been the focus of much English-language media attention in recent years, much less has been written about China’s relationship with Hungary, the Czech Republic, Poland, and other CEE nations.

Project Sinopsis is a joint project between AcaMedia and the Institute of East Asian Studies at Charles University in Prague that seeks to inform the Czech public about China and its burgeoning role in the region. CDT English editors recently interviewed Martin Hála, founder and director of Project Sinopsis, and the project’s editor, Anna Zádrapová, about their work, the developing relationship between Beijing and CEE capitals, and the impact of that relationship on the local regions and the world. This interview will be followed in coming weeks by a series of columns for CDT by Project Sinopsis staff which will explore various aspects of the China-CEE relationship.

Interview with Project Sinopsis:

China Digital Times: What is the mission of Sinopsis? What has the response been to your reporting among the Czech public and the government?

Project Sinopsis: Project Sinopsis has been designed as a response to the heightened demand for reliable information on and analysis of contemporary China in the aftermath of the recent foreign policy reversals in the Czech Republic and elsewhere in CEE. The region registered steep growth in China’s influence in the last few years, yet the general understanding of the new “strategic partner” remains rudimentary, both among the public and the political elites steering this new political course.

At the same time, there are pockets of knowledge on China both within the region, and internationally; they just remain sequestered from the public discourse. Sinopsis aims to bridge this gap and bring information and analysis from academia, thinks tanks, and similar knowledge production hubs to the general public through a close collaboration with local vernacular media.

The government mostly tries to ignore us; they only spring to action when we release what they see as particularly damaging information, such as embarrassing quotes by Czech politicians printed in Chinese media, or information on meetings and gatherings the government would rather hush up. In such cases, they either try to deny or explain away. A prominent Chinese company, CEFC, occasionally threatens to sue our media partners through a local law firm. (Ironically, the company has now gotten itself into quite a bit of legal trouble with the arrest in New York of a high representative of their non-profit arm on corruption charges.)

CDT: Why hasn’t the 16+1 initiative attracted more attention from the Western press, as other plans related to Beijing’s global ambitions have (such as the Belt and Road initiative and related CPEC)?

PS: Why, that must be for lack of music videos on 16+1! If the Propaganda Department keeps slacking, we’ll step in with our own production…

The fact is that Belt and Road may be better known, but not much understood, either. 16+1 remains more obscure still, yet it may be the most remarkable development in Europe you have never heard of.

It is a feat of China’s diplomacy, simultaneously dividing the already fractured EU and reenacting the East European “bloc” — this time under Chinese, rather than Russian tutelage. The reason why it doesn’t get the attention it deserves appears two-fold: First, The EU is preoccupied with so many other pressing problems, from Brexit to migration; Secondly, while Europe obsesses, quite understandably, about Russian meddling, that preoccupation also diverts attention from what might ultimately prove a more consequential development.

CDT: In a recent report, Sharp Power: Rising Authoritarian Influence, NED compares the soft power approaches of China and Russia in four Latin American and Central European countries. They say, “Chinese foreign policy toward Central European countries has three main priorities. As elsewhere in the world, the first priority is securing adherence to the One China principle….Second, since initiating the 16+1 platform in 2012, China expects each state to be an active contributor to the forum, through which it seeks to foster cooperation with sixteen Central and Eastern European countries…The third priority for Chinese foreign policy in the region is less tangible than the previous two. In the CCP’s framing, China is working to achieve commitments from individual states to build a partnership with it based on mutual respect, shared interests, and win-win cooperation.”

Would you agree with that assessment?

PS: We agree, but would like to add a more general perspective without which it is difficult to understand both Russian and Chinese priorities in this region. We see a new treaty system emerging in “Eurasia”, an often uneasy quasi-alliance between Russia and China in the post-Soviet space, first practiced and perfected in Central Asia in the last two decades since the establishment of the Group of Five in 1996 and the Shanghai Cooperative Organization (SCO) in 2001. This somewhat forced marriage of convenience really only got going after the Crimea crisis in 2014, as evidenced by the alignment treaty between the EEU and BRI of 2015. Now the whole arrangement moves further west to CEE in a modified version, with Russia as a tacit partner. Interestingly, people tend only to watch the mostly covert Russian activity in the region, while ignoring the very overt Chinese one.

CDT: Why is Russia not included in the 16+1? How are Chinese moves in CEE perceived by Russia?

PS: You would expect Russia as the old hegemon in Eastern Europe to be alarmed by China’s advances, but it clearly is not. Both powers reached an accommodation earlier in Central Asia which they now bring to this region. The difference in CEE is that Russia cannot be an open party to 16+1; unlike in Central Asia, where formal Russian participation is welcomed by local elites, in large parts of Eastern Europe, namely in the Baltic and Visegrad countries, strong anti-Russian resentment lingers. On the other hand, China, a big unknown, is seen neutrally, even positively. 16+1 with open Russian participation would inevitably collapse; it might not even come up, in the first place. Russia has to remain a silent partner in the endeavor.

CDT: Where does the neutral or positive image of China come from, and is that generally held by the people of the 16+1 CEE states, or the governments, or both?

PS: The sad fact is that people just don’t know much about contemporary China. Is it communist or capitalist? Rich or poor? Is it getting more democratic and free, or less? This confused image probably exists anywhere, but perhaps more so in Eastern Europe that had until recently relatively little exposure to the PRC. Given their own history, people in the region used to be instinctively put off by the fact that China is a communist dictatorship. Thirty years after the fall of communism in Eastern Europe, this seems to matter less, plus the Chinese communists appear unusual in that they carry a lot of cash; the comrades we used to know were always poor. At the same time, the ideal of democratic capitalism that East Europeans aspired to in 1989 suffered quite some shock in the 2008 financial and 2015 refugee crises. Many people now look at China and see less the “dictatorship” part, and more the “money” part.

CDT: Why are Chinese loans attractive to CEE states? Why don’t CEE states, especially those that are EU members or pending members, prefer grant funding from the EU?

PS: The mythical Chinese investment in Eastern Europe remains negligible – with a few exceptions, mostly in the Balkans – lagging far behind investment from Western Europe, and even from other Asian countries (including Taiwan). The EU has its own infrastructure development program called Structural Funds that has pumped many times more money into the region. The EU funds come as grants, i.e. free money, whereas the Chinese investment materializes, if at all, as acquisitions or loans. Yet, China’s money is preferable to certain quarters in CEE, because it comes “without strings attached”. In real life this means that while the EU funds come with strong transparency and accountability requirements – which also means a lot of paperwork – the Chinese money has no such “strings” and can more easily feed into various shady deals and patronage networks.

CDT: What similarities, if any, do you see in China’s approach to CEE and the recent debate in Australia over Chinese influence on political parties, academia and the media there?

PS: We see similarities, and differences. Australia is now the one country in the world undergoing a profound internal debate about the wisdom of their wide opening to China. We follow the debate with fascination. Nothing like that is likely to happen anytime soon in this region: that is because Australia, for better or worse, has a real relationship with China, so there are real issues and dilemmas involved. There is a very real balance between the growing economic dependence and the political influence that China brings to Australia. China has a real impact on Australian economy, and that’s the backdrop of the debate. In contrast, most of Eastern Europe only gets the Chinese political influence without much of an economic impact – that makes the little debate we have here even more unreal. We’re not discussing reality, but hype. In Australia, they say: yes, there’s economic importance to the relationship, but is it worth the political cost? Here in Eastern Europe, we say: Chinese investment? Where is it?

The other fascinating part for observers from Eastern Europe is that in Australia, despite all the failures that came out so graphically in the debate, the basic safeguards in the system seem to be working. The media do their part, as do the intelligence services, and the political establishment takes notice. In the Czech Republic, the declassified, redacted yearly reports by the local counterintelligence called BIS increasingly sound alarm about China’s influence operations, yet the political structures that should act on these reports simply choose to ignore them. When directly confronted with the latest BIS report during a radio debate, a former foreign minister and one of the main China lobbyists said something like, well, you know, these services always get alarmist in order to justify their budgets… And he got away with it. We have our own Sam Dastyaris around here, they just do not get called out the way they do down under.

CDT: Looking at the Czech Republic in particular, can you briefly explain the evolution of the relationship between the two countries and how it has changed from Havel’s presidency to the present day?

PS: The first attempt to turn the relationship around came already in 2005, driven by a few Czech post-Communist politicians. China wasn’t ready back then, and there was little interest from the Czech business community.

That changed five years later in 2010, when the richest Czech financial corporation PPF and its consumer loans division Home Credit started pushing hard for a nation-wide license in China. They were notified that the main obstacle lay in the cool relationship between the two countries. PPF started working on it, hiring former government officials up to the ministerial level as their lobbyists.

Their moment came in 2013 when the newly elected Czech president made use of a banal government crisis to name his own cabinet, where the PPF lobbyists enjoyed unfettered access. By that time, a more active foreign policy was being formulated in Beijing by the new Xi Jinping leadership. This time, the CCP was ready to seize the day. In 2014, the new Czech policy towards China was announced, and Home Credit was awarded a national license in China. A win-win, we might say.

CDT: How does the Czech public view this win-win relationship? Are there any overlooked issues that should be of concern to the Czech public—or to the world?

PS: The win-win relationship is between China and a Czech financial conglomerate (which is, by the way, incorporated in the Netherlands). The Czech public, as a third party to this win-win, an odd man out, came out empty-handed. The two winning parties reap the benefits; the third party is left with the political and security fallout. A win-win for some may be a double loss for others.

That is perhaps the lesson to be learnt – we have to carefully distinguish between national and particular interests. An elite capture is predicated on mobilizing particular interests that can overrule the national ones. Such elite capture is of course typical for less than democratic regimes – Cambodia comes to mind as the latest example. In Europe, we have seen that this could happen even in nominally democratic societies, especially those with strong oligarchic influences.

CDT: What is CEFC and what is their relationship with the Czech government?

PS: CEFC is somewhat mysterious Chinese company that responded to the PPF breakthrough in China by setting up shop in the Czech Republic. In the Fall of 2015, CEFC went on a week-long, “shock and awe” shopping spree in Prague, bagging some prime real estate, a football club and a media conglomerate. All in all a negligible amount from macro-economic perspective, but the sheer speed of these acquisitions did help to build up the hype of Chinese investment.

CEFC’s real impact, however, has been political, rather than economic. The company employs in their Prague HQ a number of retired politicians and government officials. Their people serve as advisors in top constitutional bodies, like the President’s and the Prime Minister’s offices. Already a few months before the legendary shopping spree in 2015, the Czech President named CEFC Chairman Ye Jianming his “special advisor”.

Interestingly, this happened the very same year when Mr Ye was also named a special advisor of the former Ugandan FM Sam Kutesa in his position of the President of UN General Assembly. According to an indictment recently unsealed in the U.S., Patrick Ho, Secretary General of the CEFC non-profit arm, then wired Mr Kutesa half a million dollars. Mr Ho is under arrest in the U.S. accused of bribing several African leaders on CEFC’s behalf. Mr Ye remains a special advisor to the Czech President.

CDT: What is the perception of China and the so-called China Model among citizens of the Czech Republic? How is China portrayed in the media there and how does that influence public opinion?

PS: The perception of Communist China keeps changing. After CEFC’s shopping spree in Prague, there was much expectation that a wave of substantial investment would follow, lifting up the Czech economy. This narrative was heavily supported by some Czech politicians, first of all the President. When it became clear that this was not going to happen, disillusionment followed, and a more skeptical attitude to the official “investment” hype.

The China Model is being promoted by various Czech actors with intensive support from China. There are conferences, delegations and exchanges taking place on a massive scale. Everybody and anybody is being sent to China, down to district officials, in what amounts to a giant national junket. These visitors are dined, wined and entertained for a few days in a five-star hotel; many come back impressed, some become believers.

Yet there is also a very critical attitude in some sections of the society towards the whole, occasionally bizarre spectacle. On this issue, like so many others, the society is polarized.